Sex Abuse Cases Threaten To Bankrupt an Archdiocese

Published: December 22, 1993

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The church has set aside $2 million for settlements and plans to sell real estate to raise more money. But church leaders said they hoped to recoup most costs from the Archdiocese's insurance carriers. But the companies are resisting, saying either that the church cannot prove that it was covered or that whatever coverage it can document does not pay for damages stemming from willful misconduct, such as sexual abuse. The insurers further maintain that the Archdiocese knew of the abuses when they occurred but covered them up rather than reporting them immediately to the insurers as the policies required. In July, a group of 12 insurers, including Lloyd's of London and St. Paul Fire and Marine, asked a Federal court in Sante Fe to hold them not responsible for the church's liabilities.

The church, in turn, has filed counterclaims in Federal court and sued the companies for breach of contract in state court. "They've been using every subterfuge and trick they've got not to accept coverage," said Father Wolf. "I say to them, 'We paid the premiums. we know what the coverage is. Do your job and live up to your moral responsibility. If you want to fight we know how to fight, too.' " Should those efforts fail, he added, bankruptcy was "definitely an option."

In his letter dated Dec. 14, Archbishop Sheehan expressed his hopes that the church's insurers would become "more willing to cooperate." He also appealed to the lawyers representing abuse victims for "more reasonable figures."

"Contrary to the opinion of the plaintiffs' lawyers, this is not a wealthy Archdiocese," he wrote. "We have been here a long time, but the majority of our parishes and missions are poor and struggling."

Bruce Pasternack, an Albuquerque lawyer representing 50 New Mexicans with abuse claims, said it was unfair to ask victims of sexual abuse to reduce their demands. "How do you compensate a young man who was programmed to lead a gay life style, who lost his faith, who faces a lifetime of depression and will require a lifetime of therapy?" Mr. Pasternack asked. "There's no amount of money that will fully compensate him, and it's very clear that the Archdiocese knew these things were going on. It was virtually institutionalized here."

Mr. Pasternack maintained that for many years the Catholic Church dumped abusive priests in New Mexico in much the same way that the Federal Government conducted nuclear tests and left its nuclear waste here. "They'd be sent here from all over and they'd like the weather," he said. "This was ground zero of ecclesiastical pedophilia in the world."

Mr. Pasternack urged the church to lean on its insurers, whose policies, he said, provide at least $70 million in coverage. That would more than cover the value of the settlements, which he placed at "substantially less" than the $50 million Archbishop Sheehan mentioned. Until now, Mr. Pasternack estimated, the insurance companies had paid $15 million to 20 New Mexico law firms defending the sex abuse cases but only $100,000 in claims.

"We do not think the Archdiocese should have to collect money from any parishioners or sell any property," he said. "The Archbishop's energies would be far better spent in forcing the insurance companies to pay. I get the feeling that Lloyd's and St. Paul and Interstate are laughing at the Archdiocese."

A lawyer for Lloyd's of London, Richard F. Johnson of Lord, Bissell & Brook in Chicago, called Mr. Pasternack's comment "an unfortunate choice of words for a very serious matter," but reiterated that the insurance companies bore no liability for misconduct that was intentional and foreseeable. "From the past history of these men, the Archdiocese could have expected injuries to happen," he said.

Photo: Archbishop Michael J. Sheehan of the Catholic Archdiocese of Santa Fe, N.M., telling the story of Our Lady of Guadalupe during a special Mass in her honor on Dec. 12 in Albuquerque. He has warned parishioners that the archdiocese might face Chapter 11 bankruptcy. (Alexandria King/The Albuquerque Journal) (pg. A21)